Most Improved Purchasing Operation – Step Change

30th January 2013

Tim Carrier

Head of Procurement

From 1984 to the present day…Building the business

including a sales pipeline of over £4bn

1984 1987 -1989 1991 2000 2004 2007 2010 2011

Company

formed

within CIPFA

Capita launched

from

management

buyout

Full listing on

LSE

FTSE

100

2 People

£8m t/o

98 Staff

£25m t/o

320 Staff

11 Sites

£453m t/o

7,500 Staff

115 Sites

£1,081m t/o

23,000 Staff

200+ Sites

£2,073m t/o

30,000 Staff

260 Sites

300 Sites

37,000 Staff

£2,774m t/o

£2,930m t/o

46,500 Staff

350+ Sites

2 Internal

Capita

named 'Best

BPO Provider

2004

Awarded

largest ever

contract with

Prudential

Major new

contracts and

extensions

Total

value:£795m

Creating

growth

organically

and

through

acquisition

About Capita

Historically, Capita’s central procurement team (Group Procurement) had limited

influence on the company’s global third party expenditure of £865m per annum.

With 92 Operating companies over 3 continents and over 350 site the starting

point was:

18 acquisitions in 2010 followed by a further 24 in 2011

90% of spend was controlled and managed on a local level, with Group

Group Procurement only responsible for company-wide ‘indirect

contracts’.

Lack of visibility or control of the amount being spent on services from

third party suppliers.

The large and ever-expanding breadth of Capita’s services means that a

proportion of the external expenditure on services can, in fact, be kept within the

Group.

In June 2011, following numerous acquisitions, the Capita Operating Board

decided to consolidate its procurement teams to drive incremental cost benefits.

And with the ultimate aim of controlling all expenditure over £100K.

The Background

to re-organise and optimise processes,

to gain financial control through engagement across the businesses, and

ultimately to drive incremental bottom line profit.

Develop a new governance model allowing budget removal of cost savings

Build an effective, flexible procurement organisation for Capita Group

Deliver sustainable benefits for the Group via leverage and innovation

Develop an optimised and sustainable supply chain

Deploy best in class technology and intelligence to drive efficiency

Develop procurement policies to minimise risk, drive control and compliance

Lead the delivery and control of driving expenditure within the Group

Provide benchmarking to enhance the competitiveness of our businesses

Up-skill Capita staff in relation to Group contracts and procurement skills

Deliver an improved service to all stakeholders internally and externally.

Key Objectives.

Procurement Transformation

“...a true bottom line

impact of over 5% of

the company’s profits

could be achieved”

Planning & Execution

New Operating Model - The Embedded Procurement model gives the team all

the tools they need to provide the individual business units’ operational delivery

teams with the required expertise to deliver best value procurement solutions.

Innovation & Creativity

Capita First Agenda – Through senior stakeholder engagement, benefits

analysis and the new business partner model, Group Procurement was able to

influence and migrate spend from external 3rd party suppliers to our own

internal providers.

Help Desk – By developing and implementing a centralised Help Desk solution,

Group Procurement now provides support to internal users, producing ‘how to

buy guides’, offering operational support to internal stakeholders and

answering external supplier queries.

Green Dashboard – Capita implemented a Supplier Portal – a highly scalable

and affordable online responsible sourcing solution, which enables suppliers

and Procurement to track and monitor environmental factors, carbon emissions,

labour, health & safety and bribery and corruption information.

Innovation & Creativity

ProMPT2 - A Procurement Methodology has been developed to ensure

consistency of approach, which includes a suite of tools and templates on a

centralised SharePoint site.

Intelligence Tools and Benchmarking – The newly created Market Analysis

function creates a foundation for building a strategic procurement capability

that provides the insight and innovation necessary for effective decision making

and for challenging third party expenditure.

P2P – Previously the majority of the procurement processing was manual – the

bulk of Capita’s businesses used purchase order pads and then manually input

the information into SAP on receipt of the suppliers’ incoming invoices.

eProcurement Suite – The existing eProcurement capability was upgraded

during Q4, to a fully integrated web enabled system which includes the

following best practice tools:

Spend Analytics; Online Project and Benefits Tracker; Contracts

Database; Supplier Portal; eSourcing

Best Practice

Our People - To harness the true potential of our Group Procurement team, a

capability framework for continuous improvement and support was created to

ensure alignment with the organisation’s changing needs – our ‘Alongside’

methodology.

Supplier Relationship Management – The principles of Group Procurement’s

Supplier Relationship Management strategy ensure the sustainable supply of

goods and services:

Have regular supplier financial risk assessments and performance reviews

Deliver according to the requested specifications

Deliver in the correct timeframes

Deliver products and services with high quality standards

Provide us with competitive prices

Operate in line with the company Responsible Sourcing Policy.

Best Practice

Implemented new governance model and procedures including monthly savings review to

ensure £20m+ savings have been delivered to the bottom line.

Drove £10m+ expenditure via Capita First (retained spend)

Supplier Relationship Management Improvement innovation workshops with top 50

suppliers

Developed and rolled out automated P2P solution across the Group (500+ users)

Drove compliance to above 95% on existing Capita contracts

Implemented a new Help Desk and technology platform to aid end user experience and drive

channel shift to self service sources, freeing up scarce strategic procurement resource to

focus on savings delivery

Reduced risk across Capita, by moving 2,000+ contracts to the online contracts database

Recovered £3m (with the aim of realising c£10m by end 2012) through profit recovery and

bill audit processes

Fully implemented 20+ acquisitions 3rd party spend and procurement organisations

Delivered £2m of benefit by benchmarking several internal policies

Achievements

Strategically improved procurement in every aspect.

Clear tangible benefits were achieved with a wide mix of

elements considered best practice

Judges’ Comments

“ “

CIPS Judging Panel, Supply Management Awards 2012

Achievements

“As a provider of customer service and corporate support services, our clients

rely upon Capita to achieve levels of efficiency, quality and service that they are

unable to achieve themselves. We do this by being agile, horizon scanning and

driving innovation into our solutions using the latest techniques to achieve step-

change performance on their behalf. Group Procurement ensures that Capita’s

Supply Chain comprises the right balance of stability and flexibility to ensure our

customer value proposition is as compelling as our clients need it to be.”

Paul Pindar, Chief Executive Officer

“Group Procurement has transformed procurement performance from driving the

business out of the rear view mirror to one where we now have a map, route and

senior level understanding of what is required to get there. With clarity of

understanding about the business case that underpins each procurement

initiative, it becomes a much easier business decision to support and more

importantly, one which allows us to proactively engage and sell to key

stakeholders internally to achieve buy-in.”

Gordon Hurst, Group Finance Director

Testimonials – Group Board

"Over the past 12 months, there has been a clear and tangible change in the way in

which the Capita Group Procurement team have worked with myself and my

colleagues. Not only have the professionals and management within the Capita

Procurement function taken a leadership role in all of the key business

engagements with me and my extended team, but they have shown the highest

level of integrity, professionalism and clarity in their dealings with us while

maintaining complete ownership of the procurement process.”

Rob Sanderson, Client Executive – IBM

"Telefonica O2 has seen a significant change in the approach and influence of the

Capita Procurement team over the past 12 months. Previously Capita maintained a

silo approach across their business units resulting in numerous contracts in place

for the same service with o2 and no central management. Since the implementation

of the revised Procurement Structure we have managed to tie all separate contracts

in to one, therefore allowing Capita to leverage all their spend and all

business”units to realise the benefits.

Nick Hill, Key Account Manager

Testimonials - Suppliers